Financials were on fire, lifting global markets with them. Positive headlines
hit investors in waves, just when it looked like the recent rally off the
February lows was running out of steam. In the UK, Barclays finally closed
out the sale of its iShares, with the £3bn fee coming in around average
estimates. Some had thought it could go for much more, but there seems to be
a general relief that the deal has gone through full stop. Wells Fargo added
fuel to the fire by coming in with results that topped analysts’ estimates.
Wells closed up nearly a quarter on the day, with most of the UK and US
financials up by around 10% on Friday.
Another catalyst for the buying frenzy was the New York Times reporting that
all the 19 examined US banks have passed the treasury stress test. The exact
results are going to be delayed until after earnings season, but the general
relief that there will be no major surprises has flushed traders with
confidence.
US jobless figures were dismal, but slightly less dismal than before. The drop
in total claims was less than expected, though the continuing jobless claims
continues to rise. If there has been a consistent barometer of economic
sentiment this year, it is oil and true to form, crude prices closed the week
at $52 after dipping below $48 at one point.
The bank of England rate statement was a bit of a non event, as they kept
rates on hold as largely expected. The Euro was one of the weaker currencies
last week, losing ground against the dollar and falling in value against the
pound for the third week in a row.
The coming week starts with a quiet day with European stock markets closed,
and no data coming out of the US. Things will pick up on Tuesday with the
release of US retail sales, PPI and business inventories. Fed Chairman Ben
Bernanke is also due to speak in the afternoon. Wednesday brings further
inflation/ deflation data with the release of Core CPI, as well as a host of
middle tier economic announcements. Bernanke finishes the week with another
speech on Friday, ahead of a number of speeches by US and European central
bankers over the weekend.
Last week Barclays rode the quest of a wave as the long awaited sale of
iShares was completed, however the sale provided less of a lift to its tier 1
capital ratio than many first thought. The coming week sees earnings season
start to build momentum in the US with a number of financial firms such as
Goldman Sachs reporting profits. The trend has been positive over the last
few weeks, but earnings season could spring some surprises that lead to an
increase in volatility in the financial sector. One way to play this is
through a one touch trade.
A one touch trade predicting that Barclays will fall and hit £1.45 within the
next 7 days could return 125% at BetOnMarkets.
